IRS: We don’t have the resources to handle ObamaCare July 12, 2010
Posted by seeineye in : Politics , add a commentby Ed Morrissey
In the waning days of the ObamaCare debate, Republicans warned repeatedly that the IRS would need thousands of new agents to enforce the new health-insurance mandate, and that the bill didn’t provide enough resources to fund them. Rep. Paul Ryan (R-WI) estimated that it would take 15,000 new agents, while Senator John Barrasso (R-WY) said that the IRS would need at least $5 billion more than what Democrats allocated for the first ten years of the program. Now the IRS’ independent watchdog says Republicans were right, and that Congressional Democrats and the White House seriously underestimated enforcement costs:
A warning that federal tax officials will need more congressional funding to administer the Democrats’ health reform law has rekindled the partisan debate over its cost effectiveness.
Senior Republicans have said for months that the new responsibilities required of the Internal Revenue Service (IRS) under the legislation would saddle the agency with billions of dollars in additional costs — expenses not accounted for in the bill.
A Wednesday report from the National Taxpayer Advocate (NTA), an independent watchdog within the IRS, backed those claims, finding that the agency currently lacks the resources to take on the new duties. …
“Before ObamaCare passed, [Minority Leader John Boehner] and others warned that it would require an army of new IRS agents,” Boehner (R-Ohio) spokesman Michael Steel said in an email. “Democrats denied it. Now we know the truth.”
So how much will the IRS need? No one knows — and that’s the point that Republicans have been making all along. The NTA can’t figure it out, the IRS can’t estimate it, and the Democrats never seriously attempted to determine it at all. Like many other provisions of ObamaCare, they simply made up cost numbers in order to argue that the bill would be deficit neutral.
Even Democratic Senator Max Baucus, one of the original authors of ObamaCare, admitted as much in response to the NTA assessment:
The office of Sen. Max Baucus (D-Mont.), chairman of the Finance Committee, echoed that, saying Friday that funding and staffing levels won’t be decided until the IRS comes up with an implementation strategy.
“Until those factors are determined,” a Finance aide said in an email, “it’s premature to specify what the IRS will need, and certainly premature to infer the IRS won’t be able to handle it.”
That certainly is true — and again, exactly what Republicans pointed out in the debate. No one knows what the costs will really be for enforcement of the mandate, which means no one knows whether this is a deficit-neutral system at all. These costs and enforcement strategies should have been determined before passage of the bill, not left as an ambiguous fog in the very middle of how Americans will have to interact with government once ObamaCare gets fully implemented.
In fact, Congress should never have passed ObamaCare at all, since these issues clearly go beyond its competence, and this is yet another piece of evidence of just how far over their heads this got.
ObamaCare nails its first “villain” June 9, 2010
Posted by seeineye in : Politics , add a commentby Ed Morrissey
Nancy Pelosi called insurance companies “villains” last year, and in that sense, ObamaCare scores its first success today. The Virginia firm nHealth announced that it will close its doors by the end of the year, thanks to the costs associated with insuring people under the mandates imposed by Congress:
A Virginia-based insurance company says “considerable uncertainties” created by the Democrats’ health care overhaul will force it to close its doors by the end of the year.
The firm, nHealth, appears to be the first to claim that the new law has driven it out of business. “We don’t know what the rules are going to be, and, as a start-up, our investors need certainty,” nHealth CEO and President Paul Kitchen told POLITICO. “The law created so much uncertainty that is beyond our control.”
Sarah Kliff warns at Politico to take Kitchen’s missive with a grain of salt, but in doing so, underscores the idiocy of casting health insurers as profiteering villains in the first place:
The company’s finger-pointing — first reported by the newspaper Richmond BizSense — must be read with caution: For years, employers and health insurance brokers have struggled to keep pace with steeply rising health care costs.
Asked about nHealth’s decision to shut down, a White House aide said, “It’s difficult to comment on this case without fully evaluating the company in question.”
The blame game — whether health reform can be held responsible for the continuing woes of an already struggling system — will very likely become a familiar plotline as the health overhaul takes effect and political parties vie for control of the narrative.
But Pelosi and the Democrats blamed the steep rise in health care costs on insurers like nHealth while drumming up support for ObamaCare. They repeatedly demonized the supposedly rich insurance companies in order to play class warfare with health care. They and the media mainly ignored the fact that health insurers have very thin profit margins, averaging somewhere between 2-6% depending on the year. They didn’t have much room to meet the new coverage mandates while keeping costs at an affordable price, and nHealth merely felt the pain first.
Instead, this exercise shows where the actual cost drivers are — in government mandates. The intervention of governments in demanding certain coverages distorts prices. The intervention of courts in casino-like malpractice actions creates both higher insurance costs and tremendous incentives for a great deal of unnecessary care — by the CBO’s estimate, over $11 billion a year in defensive medicine. Democrats were well aware of these costs, but chose not to make malpractice tort reform a part of the ObamaCare package, despite many calls from Republicans to include it.
And what kind of insurance plans did nHealth offer? The kind of high-deductible, HSA-driven plans that put patients in charge of routine care and leaves insurance to cover the crises instead. They saved money while offering better pricing signals to hold down overuse of provider networks. In other words, nHealth was part of the real solution to “steeply rising health care costs,” and ObamaCare drove them out of business. That serves as an example of how badly this government intervention will work out in the long term — and as a harbinger of what will eventually happen with other insurers.
Forget about keeping your doctor and your plan under ObamaCare May 19, 2010
Posted by seeineye in : Politics , 2commentsby Ed Morrissey
Barack Obama promised that people who currently have health insurance would not have any changes to their status forced onto them by ObamaCare. “If you like your doctor, you can keep your doctor,” Obama repeatedly promised, adding that the hundreds of millions of Americans currently insured would not have to change plans, either. Dr. Scott Gottlieb explains in a Wall Street Journal essay exactly how wrong Obama and the Democrats were in making that promise, and describes the “defensive business arrangements” that will eliminate many provider choices for consumers:
President Obama guaranteed Americans that after health reform became law they could keep their insurance plans and their doctors. It’s clear that this promise cannot be kept. Insurers and physicians are already reshaping their businesses as a result of Mr. Obama’s plan.
The health-reform law caps how much insurers can spend on expenses and take for profits. Starting next year, health plans will have a regulated “floor” on their medical-loss ratios, which is the amount of revenue they spend on medical claims. Insurers can only spend 20% of their premiums on running their plans if they offer policies directly to consumers or to small employers. The spending cap is 15% for policies sold to large employers. …
One of the few remaining ways to manage expenses is to reduce the actual cost of the products. In health care, this means pushing providers to accept lower fees and reduce their use of costly services like radiology or other diagnostic testing.
To implement this strategy, companies need to be able to exert more control over doctors. So insurers are trying to buy up medical clinics and doctor practices. Where they can’t own providers outright, they’ll maintain smaller “networks” of physicians that they will contract with so they can manage doctors more closely. That means even fewer choices for beneficiaries. Insurers hope that owning providers will enable health policies to offset the cost of the new regulations.
Doctors, meanwhile, are selling their practices to local hospitals. In 2005, doctors owned more than two-thirds of all medical practices. By next year, more than 60% of physicians will be salaried employees. About a third of those will be working for hospitals, according to the American Medical Association. A review of the open job searches held by one of the country’s largest physician-recruiting firms shows that nearly 50% are for jobs in hospitals, up from about 25% five years ago.
The end result of the consolidation that will follow ObamaCare will be increased bureaucracies and fewer choices. The mandate burden will mean fewer independent clinics and providers, thanks to the increased start-up costs. Doctors will look for the economies-of-scale approach and join a decreasing number of larger networks. Insurers will affiliate themselves with fewer providers and networks as they pare down their offerings, which will already be constrained by the mandates for minimum coverage. The so-called “Cadillac tax” will eliminate the high-end policies now offered as insurers attempt to avoid the ruinous taxes and fees imposed on those plans.
Meanwhile, insurers in Massachusetts have already felt the damage from its ObamaCare predecessor:
The state’s four biggest health insurers today posted first-quarter losses totaling more than $150 million, with three of the carriers blaming the bulk of their deficit on the Patrick administration’s decision to cap rate increases for individuals and small businesses.
Blue Cross Blue Shield of Massachusetts, the state’s largest health insurer, reported a $65.2 million net loss for the three months ending March 31. Its operating loss was even steeper, $95.5 million. The company drew $55 million from its reserve to cover the anticipated losses from the state-imposed premium cap in the second quarter, accounting for the majority of its operating loss. …
Harvard Pilgrim Health Care of Wellesley posted a quarterly net loss of $27 million and an operating loss of $28.6 million, drawing $21 million from its reserve against losses because of the state’s limits on rate hikes. In last year’s first quarter, traditionally a weak period for insurers, Harvard Pilgrim had a $3 million net loss and a $6.9 million operating loss.
Tufts Health Plan of Watertown, reported a first quarter net loss of $51.9 million and an operating loss of $59 million. That included $40 million drawn from its loss reserve. During the same period in 2009, Tufts had a $13.1 million net loss and a $16.5 million operating loss.
Megan McArdle sizes up the problem well:
The Massachusetts governor’s answer to this problem was to simply deny the Massachusetts insurers the right to raise their prices. Then, when they refused to quote prices on the exchange at the old, controlled prices, the government essentially argued that they were a bunch of whiny liars who didn’t need all that extra money, and commanded them to list their insurance at the old prices. As far as I know, they never did find an actuary to sign off on the mandated prices, but the insurers lost their hearing.
Well, now the whiny liars have upped the ante, claiming that they lost a bunch of money in the first three months of 2010, mostly thanks to the extra money they had to reserve against the losses they anticipate under the new rates. It will be interesting to see whether we get another War on Accounting, where Deval Patrick accuses the state’s biggest insurers of the dastardly use of Generally Accepted Accounting Principles in order to embarrass his awesome government program. …
It’s hard to simultaneously expand demand, while lowering the incentives for supply (i.e. Medicare reimbursements), without having some pretty dramatic mismatches between the two. There’s an old adage common in restaurants and engineering that goes “Good. Fast. Cheap. Pick Two.” Change that middle word to “Universal” and you’ve got a pretty good summation of the problem that Massachusetts now faces–and that the rest of us soon will.
I’m not even sure we’ve gotten one from ObamaCare. So far, we’ve learned that it isn’t cheap, it won’t be fast (thanks to consolidation), and it’s still not universal. Thanks to the disincentives placed on innovation, even good may be at risk in the mid to long term.
Update (AP): And the good news keeps on coming. In Texas, the implosion of Medicare has begun:
Texas doctors are opting out of Medicare at alarming rates, frustrated by reimbursement cuts they say make participation in government-funded care of seniors unaffordable.
Two years after a survey found nearly half of Texas doctors weren’t taking some new Medicare patients, new data shows 100 to 200 a year are now ending all involvement with the program. Before 2007, the number of doctors opting out averaged less than a handful a year.
“This new data shows the Medicare system is beginning to implode,” said Dr. Susan Bailey, president of the Texas Medical Association. “If Congress doesn’t fix Medicare soon, there’ll be more and more doctors dropping out and Congress’ promise to provide medical care to seniors will be broken.”…
Ending Medicare participation is just one consequence of the system’s funding problems. In a new Texas Medical Association survey, opting out was one of the least common options doctors have taken or are planning as a result of declining Medicare funding — behind increasing fees, reducing staff wages and benefits, reducing charity care and not accepting new Medicare patients.
NYT: O-Care is really No-Care April 11, 2010
Posted by seeineye in : Politics , 1 comment so farEd Morrissey
For months, media outlets like the New York Times scolded conservatives over their concerns about rationed medical care. Sarah Palin outraged them by referring to “death panels” when the ObamaCare bill wound up containing language enabling “comparative effectiveness” boards as guiding lights for medical care decisions. Last July I wrote about comparative effectiveness, a medical-care rationing system, by asking the question of who says “no” in a government-run medical system. Today, the New York Times gives the same answer I did, conveniently after the passage of ObamaCare:
How can we learn to say no?
The federal government is now starting to build the institutions that will try to reduce the soaring growth of health care costs. There will be a group to compare the effectiveness of different treatments, a so-called Medicare innovation center and a Medicare oversight board that can set payment rates.
But all these groups will face the same basic problem. Deep down, Americans tend to believe that more care is better care. We recoil from efforts to restrict care. …
From an economic perspective, health reform will fail if we can’t sometimes push back against the try-anything instinct. The new agencies will be hounded by accusations of rationing, and Medicare’s long-term budget deficit will grow.
So figuring out how we can say no may be the single toughest and most important task facing the people who will be in charge of carrying out reform. “Being able to say no,” Dr. Alan Garber of Stanford says, “is the heart of the issue.”
David Leonhardt goes on to praise ObamaCare as the start of saying “no” to people who want more health care. That’s an interesting tack for the Times to take, especially after its screeching over the use of “death panels” by critics, which meant exactly the same thing. Now they admit that the “most important task” of the people running the ObamaCare reform is to deny people medical care — under circumstances where a group of elites decide it’s not worth it.
Once again, we have people looking at this from the notion of a shortage, crisis market. If we want to solve the problem of overutilization, which is what ObamaCare purports to do, we’re going about it in exactly the wrong manner. We need to restore pricing signals in order to make consumers aware of the consequences of their decisions, not shield those costs even further by having taxpayers subsidize even more of those costs. That would require getting insurance out of the way of normal, routine medical care and using it only for catastrophic issues, and providing tax-free shelters for medical-care funds controlled by individual consumers.
Instead, we’re slowly turning the entire medical system into an HMO, only this time with Congress and the executive branch running it. It will suck so many resources out of the middle class that only the wealthy will have any real options outside of the government-controlled network in a few years as insurers go broke under Obama’s regime of price-fixing. Once that medical care becomes an entitlement for everyone, no one will have any reason to exercise cost controls, and the comparative effectiveness policies created will wind up becoming the Dr. No of ObamaCare.
Voters say no to big government November 7, 2009
Posted by seeineye in : Politics , add a commentBy Michael G. Franc
‘Contain the scope of the debate”: This has been a key element of the Democratic strategy to enact Big Government health reform. As long as voters perceive the issue as a nice, neat, four-cornered proposal to expand health coverage, the liberals who control Congress will win. Polls confirm that Americans want Congress to expand, even guarantee, access to health care for all.
But when the parameters of this debate expand beyond health care, conservatives have a fighting chance. Once voters pick up the scent of other issues — a whiff of higher taxes and deficits, more debt passed on to our kids and grandkids, a loss of personal freedom, stagnant wages and job insecurity, profound moral concerns relating to life, not to mention an unprecedented intrusion of government into our lives — liberals finds themselves on their heels.
Tuesday’s election results suggest that America’s normally quiescent and politically independent middle class may have reached its limit. Burghers quietly lit torches and lifted pitchforks in precisely the sort of jurisdictions that provided the political oomph behind the Democrats’ successes in 2006 and 2008. Democratic candidates either lost or underperformed in Northern Virginia, Westchester County (N.Y.), suburban Philadelphia, and throughout that most suburban of all states, New Jersey.
Crucial to this turnaround was the appeal to independents of the two Republican gubernatorial candidates. In both Virginia and New Jersey, the GOP carried these voters by two-to-one margins. Why? My guess is that it’s all about taxes, debt, and too much government.
These areas, after all, rank among the most heavily taxed and regulated jurisdictions in America. According to data compiled by the Tax Foundation, 15 of the 25 counties with the heaviest property-tax burdens in America are in New Jersey. And Virginia’s Arlington, Loudoun, and Fairfax counties are not far behind.
New Jersey governor-elect Chris Christie won overwhelming majorities or held his own in all 15 of those counties. Meanwhile, Virginia governor-elect Bob McDonnell did well in Arlington and Loudoun, and actually carried true-blue Fairfax county by 51 percent to 49 percent.
Excessive taxation isn’t a problem just at the county level. In New Jersey, upper-middle-class voters also shoulder one of the heaviest state-income-tax burdens. The Garden State’s top marginal tax rate now exceeds 10 percent.
Despite the onerous tax burden, New Jersey’s total state debt has quadrupled over the past 15 years. It stands at $35 billion. The state’s budget deficit for this year stands at $8 billion and counting. Little wonder that 32 percent of New Jersey’s voters told the exit pollsters the economy was their greatest concern. Another 26 percent fingered property taxes.
So what does this all portend for the health-reform debate in Washington?
If overhauling our health system exudes the odor of bigger, more expensive government, the odds of passage plummet in the face of these growing middle-class concerns. When it comes to their own political survival, politicians possess impeccable radar. Last night’s election returns should set off those radars for dozens of Democrats who represent these overextended and financially insecure suburban families. One can almost hear those backroom conversations. “I still want to see a health-reform bill enacted,” they will assure their leaders on Capitol Hill, “but can’t we at least dial it back a bit?”
This will complicate things for Speaker Pelosi and Majority Leader Reid. How will they find a politically acceptable mix of new taxes to finance such an ambitious plan? The short answer is that they can’t. Whether they finance their plan with a tax on “Cadillac” health plans, drugs, and wheelchairs or impose massive new taxes on the “rich,” it will hit the family budgets in these middle-class communities. Memo to lawmakers who represent these districts: You will need to identify other ways to pay for the trillions in new health “benefits” you want to bestow on us, or find a more fiscally manageable way to skin the health-care cat.
Senior citizens are the other politically significant voter group whose behavior last night should set off those radars. The two Democratic gubernatorial candidates won only 40 percent of the senior vote. Memo to lawmakers: This may not be the most opportune time to further enfeeble the fiscally stressed Medicare program by shifting hundreds of billions of dollars out of it to finance yet another unmanageable federal entitlement program.
The common thread here is that our friends and neighbors in purple and blue suburban communities are giving the big thumbs down to “robust” health reform, “robust” budgets, “robust” tax rates, “robust” anything. Big is bad. They’re telling lawmakers at all levels of government to get their fiscal houses in order first.
